April 10, 2015
A reader asks, “I have an average credit score of about 600, the same with my boyfriend. We have a good chunk of money for a down payment but have been turned down by two lenders.”
“We make good money also. We don’t currently have revolving credit but have just been approved for secured credit cards. We would like to purchase in the next month or so rather than waiting. Is there anything we can do?”
Borrowers in this situation should call the FHA directly at their toll-free hotline: 1-800 CALL FHA. Request a referral to an FHA/HUD approved housing counselor in the local area who can help advise on pre-purchase issues including credit.
Pre-purchase counseling can be a big help to house hunters, especially those who are new to saving and shopping for a home.
Many lenders are looking for a minimum 620 FICO score, but some borrowers may (depending on circumstances) find a lender who is willing to work with a slightly lower credit score if compensating factors are present.
Those compensating factors can include a large down payment; FHA loan rules require a minimum 3.5% cash investment so a borrower bringing a larger down payment should expect that five to ten percent down might be more helpful. It’s important to remember that the lender is looking for several things from the borrower–FICO scores are just one part of the picture.
Reducing your debt-to-income ratio can also help. A borrower with a marginal credit score and a high debt to income ratio may find it difficult to get a home loan. We aren’t saying that is the case with this reader question, but in general it’s a good thing to know.
Do you have questions about FHA mortgage loans? Ask us in the comments section. All comments are reviewed prior to being posted.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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